Product system innovation - Developing your ecosystem

Product system innovation is the complementary ecosystem of services and products that a company creates around its main offering. It primarily asks the question: how can a company create other non-core products or services that creates a moat effect and locks in customers to their single system.

Gillette pioneered product performance innovation and profit innovation by essentially giving away the handheld razor in order to sell more high margin razor blades. However they are also a great example of a company that has turned their base product, the razor blade, into a complete ecosystem. From Gillette Venus for women, to disposable blades, shaving gel, refillable razors and much more, the company has owned the razors space for decades.

AIA are looking to create an ecosystem for their life insurance service. What is largely seen as a commoditised product, AIA has introduced their Vitality service which is a loyalty program that encourages its members to stay healthy (with the hope of reducing the number of insurance claims). Members earn ‘Vitality points’ for visiting the gym, doing a certain number of steps in a day (tracked by a fitbit-like device), having health checks and more. The ecosystem it has developed includes doctors, chemists, gyms, movie cinemas and airlines. This ecosystem model demonstrates that you don’t have to own the entire ecosystem, rather in their case, manage the collective parts of it to create a seamless single platform.